Total shareholder return and limited its role in law department benchmarks

Total shareholder return (TSR) is a widely used measure of company market performance. Over a period of time, it suggests how analysts and investors value the achievements of a company. Perhaps total legal spending in relation to a rolling three-year TSR makes sense as a benchmark metric (See my post of Jan. 7, 2009: total shareholder return and market cap growth as possible benchmark metrics.). Effective deployment of legal resources should be a part, even if small, in overall returns to shareholders.

One disadvantage immediately apparent is that considerably less than 10,000 U.S. companies are publicly traded and therefore report their revenue and have share prices that permit TSR calculations. For the much, much larger number of privately held companies, this benchmark denominator is not available. Also, it would be important to correct for a given company’s TSR the industry-wide change in that figure (See my post of Dec. 14, 2011 #1: splines.).